Joint Venture Adventures

June 3rd, 2010 · 7 Comments · Kids & Family, Property Management

I’m trying to find joint ventures. So far no luck. I feel like with my level of experience managing properties it should be easy enough to find people who have money who want to invest but don’t know anything about property.

So far people are very happy to monopolize my time and talk to me at great length and pick my brain but the minute I start talking about a joint venture they’re off like a shot.

I found a bunch of very nice properties for one of my real estate agent friends and he was very impressed in spite of the fact that he has access to the MLS that I don’t have. We saw a number of interesting properties. He’s constantly telling me how I’m wasting my time renting properties blah blah. So I said to him lets do a joint venture which he seemed opened to. In fact he brought the subject up initially. So when I told him the terms he seemed fine, then…. nothing he’s not returning my calls now.

In fact lots of people have contacted me about doing stuff with me, they like my ideas but then when it’s time to actually do a deal they are remarkably scarce. So I must be doing something wrong. Figuring out what the problem is now that’s a challenge.

I’m thinking it has something to do with presentation. I don’t exactly fit the conventional mold of real estate success. I have to sell people on the quality of my ideas. I have to work harder on developing a better, more impressive plan.

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7 Comments so far ↓

  • Mr. Cheap

    If you’re comfortable doing so, it might be worth posting your “standard” JV terms and one of your readers might have some insight into why people aren’t going for it… It might be something as simple as a couple of the terms are out of whack with what is typical…

  • In my Humble Opinion

    I am interested in a joint venture. But with all your experience I feel intimidated. I feel like you might have the “upper hand” in every situation and you might not be open to my views.

    I suspect thats what your real estate friend felt too. He’s just too polite to voice his opinion. Perhaps the JV contract leaned too far in your favor and now he doesn’t want to burn bridges since you are both in a parallel business.

    Like Mr. Cheap says post the standard JV terms. If you rather not I’ll be happy to review it privately and tell you where a lay person would run screaming from it.

    • Rachelle

      Dear Humble,

      Try not to be intimidated, my experience managing properties and tenants is great but only one part of the puzzle for investment. Without a sizable chunk of cash to invest, I have no chance of owning any property. Property management is not well paid. All I have to put in the deal is the experience running the property and making it pay.

      I think the terms of my joint venture agreement are very good. 25% equity is about half of what most other people do in joint ventures, standard is 50% equity. This seems too well paid in my opinion. Then 25% of the cash flow, when the property starts to cash flow.

      I’m not sure what puts people off. I know how to manage buildings and I know how to do things like rental market surveys, to see if the property can rent for more, I know rental laws. There is a bunch of stuff I don’t know, that I would have to learn. I don’t know much about mortgages for example.

      I also have not done any joint ventures before. My experience rests solely in managing. Getting a joint venture to work is hard. First you have to find an investor, then you have to look and find a property, then find financing, then do whatever needs to be done to get the place running properly. Buildings also take a while to turn around. There is a certain inertia the larger a place is.

      I am opinionated, it is my blog after all 🙂 but I have a very healthy respect for money. Before I got involved in a joint venture, I’d be as close to 100% certain that it would make money for the investor and for me. Otherwise I could look forward to years of working and not making any money. That would suck. I’m a lot like Warren Buffet in that I like to shoot fish in a barrel but after the water has run out.

      The level of commitment required just to find the proper investment is considerable.

      I hope this clarifies the situation a bit, if not just keep asking.

  • 2cents

    Rachelle, hats off to you! In the trenches and still alive and fighting.

    Since you are looking into the Joint Venture route, I wouldn’t discount your abilities and experience as cheap. You have a record of performance already and expertise in managing the properties and tenants. Not to mention, area expertise, market research, already formed team members like lawyers, realtors, mortgage brokers, contractors, inspectors, etc…, bookkeeping, negotiating with sellers and banks, placing offers (many, many times). Also keeping records of expenditures on landscaping, fixtures etc… This list of responsibilities goes on. This is where a lot of time is gone and even more time is gone to get the property performing.

    A Joint Venture partner is much like being married – except this one has an expected end date :). You need to set the pre-nup before you go on the honeymoon. What I mean by that is get everything in writing on all of the ‘what-if’ scenarios you can think before you get into them and write out each partners responsibilities in the venture. I would also do due diligence on the potential JV partner you are thinking of partnering up with. What kind of experience do they have with rentals, land lording, tenants, evictions, etc… What are they bringing to the table? You would be surprised how many people you will go through before you find one who will actually act. I think I’m at around 3% success rate.

    Know who you are getting involved with before you get involved. Sometimes your money partner can be worse than your tenant! They think they know all of the answers when in fact their suggestions would land both in jail. In my experience with one particular partner, his opinion was to hire a couple of ‘big guys’ to let the tenants know who’s in charge. Needless to say I got rid of him and the none paying tenants.

    I have partnered with a property manager much like you have suggested above, but only after I did all of the leg work to find and negotiate a suitable property. I wanted the property to perform well and left that to the expert in exchange for a percentage of cash flow and equity. I now currently split all profits with him 30/30 and the remaining 40% going to the money partners. We all do our part and everybody gets what they want. And yes, this is all hard, no easy yellow brick road here.

    I feel like I just downloaded a lecture.
    2cents – and a half 🙂

    • Rachelle

      I am not rushing it, as far as I’m concerned when it’s time, the proper partner will appear. I am actually considering taking a mortgage agent course, both for the extra income and service I can offer but just for the information I don’t know too much about.

  • Nick

    Don’t feel like you’re the only one going through this process. I have been stuck at this stage for awhile!